Bankruptcy is a popular way to avoid foreclosure, and allow you to get back on your feet and able to make your mortgage payments. There are two main types of consumer bankruptcy, a Chapter 7 and a Chapter 13. A Chapter 7 is like a liquidation, which means most of your debt (usually unsecured debt, like a credit card) is eliminated. For things you want to hang on to, in a Chapter 7 you will have to keep making the payments. This can be problematic if your budget is too tight to make the payments without filing bankruptcy. So, what is the answer? A Chapter 13 might be more appropriate for you, because it is more like a debt consolidation. What this means is that you have the ability to pay less for certain debts. This is referred to as “cramming down” the value, and it can significantly reduce the amount of your monthly payments.
A Chapter 13 Plan provides the blueprint for repayment of your debt, over a period of up to five years. In a Chapter 13, repayment is based off of the value of property rather than the amount due. Repaying the value is how the cram down of the loan is achieved. For a mortgage, the following factors come into play:
● The property must be investment property rather than your primary residence.
● The value of the property is less than what is owed.
● Second mortgages can also be crammed down.
The benefits of a cram down are that your payments are reduced. The reduction in payment is achieved by paying a lower balance, and might also include making payments at a lower rate. When you file bankruptcy and are successful in paying less than what is owed, you also benefit because any deficiency remaining is no longer due. For more information on how you can pay less for a mortgage through bankruptcy, call our office.
If you are underwater on a loan for real property, let an experienced attorney help you. We fight save you money in interest payments, and also by paying the value of your property rather than an inflated amount due. Call a Plantation, Florida debt relief attorney today for more information.